Chinese President Xi Jinping is meeting with his Russian counterpart Vladimir Putin on a three-day visit to strengthen ties between Beijing and Moscow and strengthen China’s status as a global power broker.
After helping to arrange a detente between Saudi Arabia and Iran earlier this month, Xi is using the trip to promote a 12-point peace plan to resolve the war in Ukraine — a proposal Putin reportedly said that he views “with respect”.
With Xi’s peace plan receiving a lukewarm response in Kiev and Washington, the Chinese leader is more likely to succeed in strengthening economic cooperation with Putin, which has deepened amid Moscow’s growing isolation.
“Xi’s trip to Russia is mainly about fostering closer Sino-Russian relations in the post-pandemic era where both powers are going through difficult times,” Edward Chan, a postdoctoral researcher at the Australian Center on China in the World, told Al Jazeera. .
“It is reasonable to expect that China and Russia will have a closer relationship economically and diplomatically,” Chan added.
These are the main economic areas that Xi and Putin are likely to target for greater cooperation.
China has emerged as a major buyer of heavily discounted Russian oil and gas as Western buyers have banned energy imports.
Russia was China’s top oil supplier in January and February with 1.94 million barrels per day, compared to 1.57 million in 2022, according to Chinese customs data. Russia’s crude oil exports to China have also increased, growing 8 percent to 1.72 million barrels per day in 2022.
China’s imports of Russian pipeline gas and liquefied natural gas rose 2.6 times and 2.4 times last year to $3.98 billion and $6.75 billion, respectively.
Meanwhile, Chinese imports of Russian coal rose 20 percent to 68.06 million tons.
Rising energy sales have given Russia’s economy, which contracted less than expected by 2.1 percent last year, a much-needed lifeline in the face of sanctions. Besides China, India and Turkey are other top buyers of Russian energy, which have taken advantage of a punitive price cap on Russian oil to access cheaper energy. Analysts expect sales to continue to rise as the war in Ukraine appears to be far from over.
Imports of Chinese goods
Shortly before the Russian invasion of Ukraine, China and Russia announced a “borderless partnership”. Much of that has manifested itself in commerce.
While Russia has been selling energy to China, Russia has ramped up imports of Chinese goods, including machinery, electronics, base metals, vehicles, ships and aircraft.
Chinese exports to Russia totaled $76.12 billion in 2022, compared to $67.57 billion the previous year, according to Chinese customs data.
An exodus of Western brands from Russia has been a boon to Chinese industries such as auto manufacturing, with China’s Geely Automobile Holdings, Chery Automobile and Great Wall Motor taking 17 percent of the Russian market last year.
Overall, bilateral trade between the two sides grew by nearly a third last year to about $190 billion and is likely to continue to grow. However, their economic relations are unbalanced.
While China is Russia’s main economic partner, trade between the two is dwarfed by China’s trade with the Association of Southeast Asian Nations, the European Union and the United States, according to customs data. According to government data, trade between these top three trading partners was valued at $947 billion, $821 billion, and $734 billion in 2022, respectively.
Before his trip to Moscow, Xi published a lengthy signed letter in the Russian Gazette calling for greater economic cooperation, investment and two-way trade.
De-dollarization of Russia
The Russian economy was temporarily paralyzed in the early days of the invasion of Ukraine by Western measures to freeze the assets of the Russian Central Bank and Russian commercial banks, cut off Russian financial institutions from the SWIFT international payment system, and the departure of Western banks and credit cards. businesses.
With Russia frozen out of the dollar-dominated international financial system, the Chinese yuan and cryptocurrency have stepped into the void. Between the summer of 2022 and February 2023, the share of yuan-based transactions grew from 0.4 percent to 14 percent of the total, according to the Carnegie Endowment for International Peace. In September, two Russian banks began lending in yuan and also used the currency for money transfers instead of SWIFT.
Russia’s growing dependence on the yuan made the country the fourth-largest offshore trading center for the Chinese currency in October.
Amid dwindling dollar reserves due to sanctions, Russia’s central bank sold $47 million worth of yuan in January to fill gaps in its budget caused by lower oil and gas revenues.
Exchanging the dollar and euro for the yuan may be an effective short-term solution, but it will make Russia more financially dependent on China, said Alexandra Prokopenko, a visiting fellow at the German Council on Foreign Relations, in a recent article for the Carnegie Endowment. for international peace.
“The de-dollarization of the economy, of which the Russian authorities are so proud, essentially translates into ‘yuanization’. Russia is drifting into a yuan currency zone, exchanging its dependence on the dollar for dependence on the yuan,” Prokopenko said. “This is hardly a reliable replacement: now Russian reserves and payments will be affected by the policies of the Chinese Communist Party and the People’s Bank of China. If relations between the two countries deteriorate, Russia could face reserve losses and payment disruptions.”